Ingersoll Rand Company, Hamilton, Bermuda, announced that it has initiated a process to explore strategic alternatives for its Bobcat and construction-related businesses, including the utility equipment and attachments businesses. The company's alternatives may include an outright sale of the businesses or a spin-off to shareholders. For full-year 2006 these businesses collectively generated approximately $2.6 billion in revenues. The company expects to conclude the process in the second half of 2007.
“Our Bobcat, utility equipment and attachments businesses represent world-class operations with exceptional people, products and brands; however, these businesses no longer fit Ingersoll Rand's long-term strategy,” said Herbert Henkel, chairman, president and CEO. “The eventual outcome of our process to explore strategic alternatives for these businesses will be the strategic repositioning of Ingersoll Rand away from the capital-intense, heavy-machinery profile of the company's past and toward a true diversified industrial company with powerful growth platforms consisting of climate control, industrial and security businesses. These businesses are well positioned to deliver consistent growth throughout the business cycle.”
In addition, the company's board of directors approved the expansion of its share-repurchase authorization, originally announced in December 2006, from $2 billion to $4 billion. The company plans to accelerate the repurchase program to complete $2 billion of share repurchases by the end of the 2007 third quarter, and will consider various alternatives to effect the accelerated share repurchase. Approximately $330 million in shares have been repurchased to date under the authorization.
The timing of the remaining $2 billion of the share repurchase authorization will depend on the disposition of the Bobcat, utility equipment and attachments businesses, as well as other uses of proceeds in conjunction with the company's acquisition program. “Our strong operating cash flow, the proceeds we generate from a sale or spin-off of businesses, and our strong balance sheet allows us to continue to pursue growth through strategic acquisitions,” Henkel said. “At the same time, the board's approval of an expanded share repurchase program provides the flexibility to deploy prospective proceeds to enhance shareholder value.”
The company also recently completed the sale of its Road Development business unit to AB Volvo for cash proceeds of approximately $1.3 billion. The sale is complete in all countries except India, which is expected to close shortly. The Road Development business unit manufactures and sells asphalt paving equipment, compaction equipment, milling machines, and construction-related material handling equipment.
Henkel said the company will use the proceeds of the sale, in conjunction with its cash flow, to supplement organic growth with acquisitions that extend the company's product lines, expand geographic markets, and enhance recurring revenue streams, as well as to increase its share repurchase activity.
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